InterOil has announced financial results for the 2008 full year and fourth quarter. For the 2008 full year, InterOil reported a net loss of $11.8 million ($0.35 per share), a $17.1 million improvement over the prior year loss of $28.9 million ($0.96 per share) despite the turmoil in global capital and commodity markets. EBITDA, (Earnings before Interest, Taxes, Depreciation and Amortization)(i) for the 2008 year totalled $22.5 million, an improvement over 2007 EBITDA of $5.3 million, on the basis of sales and operating revenues of $915.6 million, a $290.0 million increase (+46.4%) compared to the year ended 2007 and the best result the Company has achieved to date.
The fourth quarter loss of $34.2 million ($0.96 per share) compares to a loss of $2.7 million ($0.09 per share) in the same period a year ago. EBITDA loss was $28.8 million on the basis of revenues of $218.6 million, compared with a gain of $6.9 million on revenues of $172.8 million in the prior year period. The fourth quarter results were negatively impacted by the rapid decline in crude oil prices during the quarter which reduced gross margins by approximately $52.3 million. These losses were partially offset by short and long term hedges which netted a profit of $27.8 million in 2008. A further $18.0 million of unrealized hedging gains are carried forward on our balance sheet to be realized during 2009.
Business Segment Results
Net profit for the Company's Midstream Refinery segment showed a significant turnaround from a loss of $8.8 million in 2007 to a profit of $4.7 million in 2008, an improvement of $13.5 million. This was primarily due to an increase in derivative gains from non-hedge accounted contracts, improved margins resulting from interim revisions to the pricing formula applicable to sales of our refined products in Papua New Guinea as well as improved margins in naphtha and low sulphur waxy residue refined products. Annual refining EBITDA in 2008 totalled $25.6 million which compares to $18.4 million in the previous year.
In the Company's Midstream Liquefaction segment, a net loss of $7.9 million was incurred as our share of expenses incurred by the PNG LNG Inc. joint venture during the year to progress the Liquefied Natural Gas (LNG) project in Papua New Guinea.
The Downstream segment derived a net loss of $1.2 million compared with a net profit of $4.7 million in 2007. The decrease was mainly due to a fall in the fourth quarter in the product pricing upon which this segment's margins are based and a net realizable value write down of $4.3 million on our year end finished products inventory, all ultimately derived from significant declines in crude oil prices during the quarter. Annual downstream EBITDA in 2008 totalled $5.8 million compared to $12.7 million in the previous year.
During 2008, the Upstream business segment achieved a net profit of $2.1 million compared with a net loss of $19.1 million in 2007. The improved results benefitted from a gain of $6.5 million on the sale of non-strategic exploration assets, lower 2008 exploration costs in comparison with 2007 when the Elk/Antelope seismic program costs totalling $13.3 million were expensed, and a non-cash accounting gain of $4.7 million following the decisions by two indirect participation interest investors to waive their rights to convert their interests into common shares.
Improved Balance Sheet and Liquidity
During the year, the Company strengthened its financial position with the repayment in May 2008 of its $130.0 million secured credit bridging facility by means of conversion of a $60.0 million portion of the facility into equity and the repayment of the remainder funded by the issuance of $95 million principal amount of 8% convertible debentures maturing in May 2013. These transactions reduced our Debt-To-Capital Ratio (Long term Debt/(Shareholders' equity + Long term Debt)), so that it was 36% at December 31, 2008, which was substantially down from 67% at the same time in 2007.
As at December 31, 2008, InterOil held cash, cash equivalents and restricted cash of $75.3 million (2007 - $66.2 million), of which $26.3 million (2007 - $22.4 million) was restricted under the BNP Paribas working capital facility utilization requirements.
Our cash inflows from operations for the year were $15.6 million, compared with an outflow of $31.6 million for 2007. The improved cash flows from operations were mainly due to the reduced working capital requirements for our refinery in the fourth quarter of 2008 due to the significantly decreased price of crude oil.
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